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06.07.2005 - News about eficert in the Nordic Insurance Journal

Certified financial competence at European level
As yet there is no major need for being able to certify financial competencies to guarantee their uniform level throughout Europe. But that day cannot be far distant. And if businesses cannot themselves see their way to dealing with such certification, a directive ordering this to be done will come as a matter of course. Consequently, intensive efforts are being made both to establish the requirements to be placed and to put in place the certification needed to substantiate compliance with the requirements. The Nordic countries have been active in this context through The European Financial Certification Organisation, which goes under the abbreviated name of “eficert”.

Can I rely upon the competence of my advisor?
Efforts to establish European standards for financial competencies have one father and two mothers. The father is the single market. This has added an international dimension to the turnover of financial services. One of the mothers is the need of the customer to feel able to rely on the advice given by the seller of the services. The second mother is the commercial need experienced by providers of financial services to know what they are up against when competing for the customer’s favour. In reality, this is an extremely unholy trinity that together are providing the energy to establish standards and set up the provision of certification and certificates.

At national level this has been going on for more than half a century in most European countries, and has resulted in the present national standards. In some countries the law requires these standards to be complied with. In others, market players have themselves voluntarily undertaken to comply with the requirements, as is the case, for example, in the Norwegian and Danish insurance business. In the remaining countries market forces determine when a standard becomes generally applicable. The time is ripe to establish a similar process at European level.

Respect for national standards
The vocational training providers who have got together in eficert have a distinct approach to the term “joint”. The standards that have been agreed in the individual countries – in one way or another - are to be the cornerstone of a European standard. The competence obtained by players living up to this standard is thus the basis for complying with the European standard - if this in itself is not directly equivalent to the standard.

In the current educational-political debate one would say that real competence – what one can actually do irrespective of how one has learned it – should be included and give credits in the educational systems and relative to employment opportunities. By adopting this principle, eficert stands out from most other certification organisations.

This does not mean that the national standards are necessarily adequate measured against a European benchmark. If this is not the case, the national standard will be expanded upon until reaching the European level.

Many certifiable financial competencies
The EU directive on insurance mediation has been implemented in national legislation that entered into force at the start of 2005. Under this legislation requirements are set for insurance brokers’ competencies and correspondingly for agents and their staff. In principle, those subject to the requirement must be able to document that they possess the required competence, and as a result there is a need for having one’s competence certified, so that those concerned, with the certificate in hand, can document that they conform with legislation.

Here we are speaking of insurance competencies pure and simple; there are several others there may be a need to certify - perhaps also at European level. The most obvious is the ability to deal with claims. This is certified in Norway under a national agreement, but the single market may lead to a need for a European certificate.

Yet another obvious area is trading in securities. In Sweden, this competence is now subject to legislative requirements at a level high enough for those advising clients. In this case too, for obvious reasons there is a European perspective.

There may be a question of many more. When establishing eficert this broad range of possible certification needs had a definite impact on the development of the organisation.

Financial Advisor & Financial Planner
However, it was decided to start with two mediatory and advisory competences which span of the areas in the financial sector: one is the expertise needed to sell the broad range of financial services to private persons, taking into account the legal aspect, assets, liabilities, revenues and tax. The European name of this competence is “Financial Advisor” – perhaps somewhat misleading in Danish eyes, as selling is the main competence.

Figure 1 shows the exact demarcation of the competence and the qualifications of which it consists. Anyone wishing to examine the professional basis of this competence can click into the eficert website at the following address: www.eficert.org/site/certification/fp.htm .

The second competence for which eficert has decided to establish certification is that needed to provide actual advice on asset management in the short and the long term with reference to all aspects of asset management, legal matters, tax and business activities. The European designation of this competence is “Financial Planner”. A person providing this type of (long-term) advice (hence the word “planner”) may be a sales consultant, but will primarily be advisor acting independently of any providers of financial services. In the countries south of us, the profession enjoys equal standing with accountants and lawyers. But finance houses also employ people as portfolio managers who are paid for the actual work performed.

Figure 1 also shows the precise demarcation of this competence. Anyone wishing to examine the professional basis of this competence can also click into the eficert website at the following address: www.eficert.org/site/certification/fp.htm .

The European Financial Markets
The European aspect is taken quite literally. To obtain the two certificates, one must have studied the European financial markets and the relevant EU regulation of these. Following the course of training one must pass an exam, which is the same for all who have acceded to the certificate and have obtained the right to issue it.

The idea is to ensure that everyone who holds the European certificate is able to identify the problems a client entering - or leaving - the country may encounter, since the certificate holder will be familiar with and have an idea about various circumstances around Europe and will be capable of making comparative analyses to assist the client find the right advisor to help him - that is, if the advisor him or herself does not have the necessary knowledge from the training he/she has received.

 

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Name of certificate	The competencies achieved	The specific competences tested by the qualification
Financial Adviser (eficert)	Is able to give advice and create solutions by means of standard products for personal risk protection, pensions, savings and investment, income protection and mortgages, based on a needs analysis.	Establishing a needs analysis including legal requirements, social insurance, pension arrangements and taxation aspects of the client Establishing cover for the needs and point out possible alternatives Justifying and explaining the value of the solution to the client and conclude the sale Explaining the legal background for the financial products sold to the client Explaining the problems related to cross border transactions in Europe Applying the ethics of selling financial products and se
Financial Planner (eficert)	Is able to develop a comprehensive plan covering aspects concerning personal risk protection, income protection, pensions, savings, investment, mortgages and other asset management aspects based on a proactive review of the client's legal, financial and social situation.	Performing a life cycle analysis comprising all financial, risk, legal, social and tax aspects Developing a financial plan that over time will meet the client's needs and interests Giving advice to the client on choice of suppliers of financial services Managing the relationship with the suppliers on behalf of the client Identifying opportunities and suggesting solutions to problems related to cross border transactions in Europe Applying the ethics of financial planning

Figure 1: The definition of the Financial Advisor and Financial Planner competencies

The course of training consists of two parts: one is intended to provide a picture of the forces generally affecting the European financial markets and the EU’s influence on this. A book, which all participants must follow, has been written for use in this part. It is entitled “The European Financial Market”. It will be published in Danish in the late spring of 2005.

The second part is an exercise in comparing conditions in three different countries, e.g. Denmark, Italy and Germany. The point of departure is an actual family wishing to move from one country to another, and the objective is to discover all the relevant problems that must be allowed for in this situation.

The Danish educations and eficert certificates
In Denmark, we are first concentrating on getting the Financial Advisor certification up and running. During 2005, it will become possible to acquire this certificate. We will hold back on the Financial Planner certificate for a couple of years.

As mentioned, the point of departure is national courses of education and training. Consequently, the many Danish insurers who have passed the personal insurance line in the business insurer examination are extremely close to the objective. Their competence only needs to be complemented with the financial advice method and a number of financial disciplines. No matter what, during the forthcoming years this course of training will be an indispensable part of a personal insurance consultant’s stock in trade. The knowledge may be acquired by participating in a newly developed module, which will be integrated into the agents training of the future. It is called “Financial Advisory Services” and is a little more comprehensive than the modules we are familiar with from the old insurer training course. Of course, in addition one will have to take “The European Module” in order to obtain the certificate.

Thus in the Danish insurance business there are some 1,500 persons who are not far from certification – no further than a course of additional training, which they will have to undergo soon in any case. And if one has a background in banking, you will probably only need to take “The European Module”.

Over and above this group, there are quite a few people who have a general personal insurance training at levels 4 and 5 in the Danish educational system, who are just as close to certification as the sales consultants – somewhat depending on the focus of their hitherto work activities.

So at a rough estimate there are more than 2,000 persons who can take the training they already have and “add it to the kitty” when expanding their range of abilities based on their current knowledge.

The two modules in the training course leading to certification will be launched during 2005: the European module in the summer of 2005 and the Financial advisory services module in the autumn of 2005.

Thus the new education for insurance agents started in October of 2003 are structured in such a way that within the framework of the educational system a course of training can be put together which together with the relevant practical experience will lead to the certificate-entitling competence of “Financial Advisor”. This may either be as a supplement to the much sought-after “qualified insurer” or instead of it. The latter is of special relevance for employees of specialised life and pension companies or of banks.

The other Nordic countries and the eficert certificates
BI Forsikring in Norway, Financial Education (which is part of the Stockholm Business School) in Sweden and the Education Centre in Finland are all associated with eficert. In all three countries the basis of future certification is a national competence. In all three countries the plan is to arrange future training courses so as to result in certificate-entitled competencies - both as Planner and Advisor.

The plan in Sweden is to start certification as early as the spring of 2005, as the first of the Nordic countries. Denmark plans to follow in the autumn of 2005.

 

Author:
Rolf B. Harsløf is an MA and qualified insurer and director of the Danish Insurance Academy. In addition, he is the vice chairman of the board of eficert (The European Financial Certification Organisation).

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